Vince Cable has warned that continued uncertainty over Britain’s position in
the EU could lead to “economic nationalism” across Europe.

Mr Cable, the Business Secretary, warned that countries could resort to trade warfare if “we start adding to the uncertainty in Europe”.

With less than 24 hours before the Prime Minister makes his long-awaited speech on the European Union, Mr Cable used another intervention to urge David Cameron not to “overestimate our own negotiating position”.

He said that he has no problem with the “idea of a referendum”, but insisted here was currently "no reason” to hold one.

"One of the great dangers in the present position, and we are still in a crisis situation in the UK and in the eurozone, part of the fallout from the collapse of the banking system,” Mr Cable to BBC Radio 4’s World At One programme. “We are in a crisis situation. There is a danger that countries resort of economic nationalism. We’ve seen this historically in the past.

"One of the real advantages of being a member of the single market, of Europe, is that it provides asset of rules, where countries don’t throw up trade barriers, they have rules, which for the most part are respected, about not rushing forward with very expensive state aids that governments can’t afford.

"It’s keeping economic nationalism under control. We’ve got to contribute to that. Britain generally has done so, so far, we’re a pretty liberal county. But once we start adding to the uncertainty in Europe there is a real danger that those forces economic nationalism could resurface, in a very ugly way."

The Business Secretary has warned that Mr Cameron’s forthcoming pledge to hold a referendum on Britain’s membership of the European Union risks driving away investors and comes at a terrible time for the economy.

Mr Cameron is expected to pledge to renegotiate Britain’s membership, if he is re-elected in 2015, after which the revised relationship will be the subject of a referendum.

He briefed Conservative Cabinet ministers on the contents of the speech and warned them that they must back the Government’s position on staying in the EU.

Mr Cable said that elements of the EU need to be reformed, but he said that Mr Cameron’s desire to negotiate a new relationship is “dangerous” for UK business.

"There are things in the EU that need reforming, of course,” Mr Cable added. “But why I used that phrase was because it is dangerous, at a time when we’re emerging from this appalling economic crisis, to create massive uncertainty, and our trade relationship and the potential for, in comes instances, actually leaving the EU , leaving he single market.”

The Business Secretary reiterated that there is no need to have a referendum immediately.

“I’ve no problems with the idea of a referendum,” he added. “Parliament has just legislated for a referendum and set out very clearly the conditions under which it can be triggered. There’s no reason whatever to reopen that whole argument.”